Identify the Audit Assertions for each Issue

What assertion is related to each issue?

1. The allowance for doubtful accounts is a fair amount.
2. All liabilities owed as of year end are included in the financial statements.
3. All purchase returns are valid.
4. Purchases during the last week of the year might be recorded after year end.
5. Accounts receivable has been factored.
6. Special-purpose entities financed a building and neither the asset or the related debt is mentioned in the financial statements.
7. Retail method of accounting is used to value items.
8. Percentage of completion method is used..
9. A client does not have trained employees to write footnote disclosures for their benefit footnote.
10. A subsidiary was purchased when stock prices were at all time highs and so goodwill may be impaired.
11. The firm issued redeemable preferred stock that must be redeemed next year.

Solution Preview

Assertions about account balances:

• Existence--assets, liabilities, and equity interests exist.
• Completeness--all assets, liabilities and equity interests have been recorded.
• Rights and obligations--the entity holds or controls the rights to assets and liabilities are the obligations of the entity.
• Valuation and allocation--assets, liabilities, equity interests are included at appropriate amounts.

Assertions about transactions and events:

• Occurrence—transactions and events that have been recorded have occurred and pertain to the ...

Solution Summary

Your tutorial is 455 words and includes a list of all the assertions by the three categories so all the potential assertions can be studied. The primary assertion is noted.